Governments, both state and federal, keep handing buckets of money to the Latrobe Valley coal industry. When will they learn it's a strategy that's not working?

JUST A LITTLE OVER two years ago the now-Treasurer Joe Hockey proclaimed to a conservative think tank in London that the "age of entitlement is over" but nowhere in his speech did he mention the coal industry.

If he had, perhaps he would have reflected on the folly of tens of millions of government funds wasted on speculative coal demonstration projects involving promises of burning dirty brown coal in Victoria's Latrobe Valley.

But Hockey didn't. Instead, the Abbott and Napthine Governments have recently announced that they have doled out $25 million to an Australian subsidiary of a giant Chinese power company, Shanghai Electric Power. Taxpayers are being tapped to cover almost a quarter of the construction and 'operation costs' for a new demonstration plant making briquettes out of brown coal in the Latrobe Valley.

Shanghai Electric Power is not from struggle street: its ultimate parent company is the China Power Investment Corporation, one of China's biggest publicly-owned power generators and polluters.

The grant to Shanghai Electric Power's Australian subsidiary is the latest from a new $90 million joint federal-state government program, Advanced Lignite Development, to subsidise companies with grand dreams of converting brown coal into everything from oil to fertiliser.

In mid-May Coal Energy Australia, a two-year old company with no track record in the coal industry and a turnover of just over $26,000 in 2013, was given a grant of $30 million. Having racked up a loss of over half a million dollars in its first year of operation, without a government handout the company faced a certain future: collapse.

At the same time another $20 million was given to Ignite Energy Resources to build a demonstration plant turning brown coal into oil products. Ignite Energy Resources was desperate for funds too as, after losing $30 million in the two preceding years, the company's auditor had raised concerns that the company's current liabilities were greater than its current assets. Nor is the company a model of stability as eleven directors have come and gone in recent years.

The reality of global warming being caused by carbon dioxide emissions means it is now time to move on and map out a coal-free future for the Latrobe Valley

The latest announcements are just the latest in a string of projects that have been touted as providing huge economic benefits for the Latrobe Valley but have delivered nothing other than occasional windfalls to a handful of company executives and shareholders.

In 2002 the then-state Labor government promised to allocate billions of tonnes of brown coal to a raft of companies proposing major new projects, massive investment and lots of jobs. There was the proposal from Australian Power and Energy Limited (APEL) to build a $6 billion power station to turn coal into gas and then some of the gas into diesel. Ultimately the deal wasn't viable and quietly died.

HRL got a coal allocation for a new power station too along with promises of $100 million in federal and state support. After years of plans and promises, it turned out it too wasn't viable. Loy Yang Power promised to build a new 1,000 megawatt power station, but as with the other projects, it never eventuated.

While brown coal once served Victoria well, the reality of global warming being caused by carbon dioxide emissions means it is now time to move on and map out a coal-free future for the Latrobe Valley. Power demand is falling, solar and wind power rising and the old coal plants are getting ever closer to their use-by date.

The federal and state governments seem obsessed with pretending that coal's glory days can be revived by subsidising a handful of speculative projects and doing everything they can to block the transition to a more sustainable alternative. Instead of supporting energy efficiency or the growth of solar and wind they seek to undermine them.

Ultimately though, charting a more diversified economic future for the Latrobe Valley and other coal-dependent regions is more likely to bubble up from the communities with most to lose from reliance on a commodity with a bleak future.

Already the economy of the Latrobe Valley is diversifying from the growth of tourism, education, agriculture and services industries. One of the biggest remaining barriers to accelerating the transition is the coal industry's sense of "entitlement".

Actions

Share

Comments (18)

Blzbob :

14 Jul 2014 5:54:05pm

The crazy thing is that there are few alternatives to coal when it comes to fuelling smelters. So why are we so intent on wasting it to run our air conditioners?Currently lpg is the most efficient fuel for running our private transport needs, so why are we sending it all to china.Then crude oil is being wasted by burning it as fuel when it has so many other better uses, from the manufacture of paint, plastics and industrial cleaning products

There will always be a need to use coal, but not at the quantity and rate that it is currently being squandered at.We should be using alternatives for everything we possibly can and only using fossil fuels when there is no other choice available.

once we have wasted our valuable resources as cheap dirty fuel, what then?

marg1 :

14 Jul 2014 12:42:33pm

Yes it is very sad this government seems to welded to the fossil fuel industry - I suppose they have to pay back those who helped put them into power and also do Rupert's bidding - he is another climate denier who has CSG investments in USA. We will become pariahs of the world with other countries all moving towards renewables and ETS's. We will also miss out on all the investments and jobs that could be generated from renewables as well as suffer from the worst effects of ACG. Abbott and his cabal will go down in history as the most backward and unethical Prime Minister and government ever foisted upon this wonderful country.

Skeptic :

14 Jul 2014 10:40:39am

No, as a strategy it works just fine! You simply need to define WHICH strategy is being pursued. If coal-fired electricity is becoming redundant and less profitable due to the rise of renewable energy, but the fat cat mates of the treasurer will lose their shirts because they have bet the farm on coal, then the easiest course of action for the government is to bail them out of financial trouble. Perfectly simple! What I find interesting is that a similar attitude was not demonstrated in the case of the car manufacturing industry. Perhaps Ford and Holden hadn't contributed a large enough donation to the Liberal Party and the coal lobby did?

Karin Geiselhart :

14 Jul 2014 7:28:24am

sad reality, our government can't see the freight train of stranded assets that is coming towards them at 100 km. Even sadder, that is our future they are putting down the drain. there has to be an economy after coal, but Mr A has no Plan B.

Stan :

14 Jul 2014 5:16:42pm

My suggestions is they just shut all these terrible polluting electricity generating stations right now. No ifs or buts.Oh what is the % of Vic power that comes from these?, don't worry all the subsidised solar and wind will cover that.

Gillian Collins :

13 Jul 2014 11:28:31am

There is no shareholder value in counting as an asset something that is in the ground, does not belong to them, and will destroy their portfolio if used. And why would you trust a company that has no experience doing what you think they can do? Both of the companies cited in this article have seriously bad recent economic histories. There is no shareholder value in that.

Dave :

Microseris :

10 Jul 2014 5:32:53pm

The Liberal Party are taking us forward, to the 1950's. Where whitey was king, women were in the kitchen, the comb over was fashionable, going to church provided a veneer of respectibility, forests were for logging and there were no consequences of burning as much coal as you like.

Jack :

10 Jul 2014 2:56:04pm

And Melbourne's own Environmental Clean Technologies is on the verge of Greatness in India with there Lignite Resources cleaning Technology known as Coldry which takes out most of the impurities to have a Black Equivalent Coal from Lignite,

Graham Dixon :

10 Jul 2014 1:54:03pm

Goodonyer, Nick! Coal is the main culprit for the human-made increase in Greenhouse gases. Burning coal releases more than twice as much GHGs as natural gas, the next worst fossil fuel. And it’s not just Carbon Dioxide. Coal mining releases into the atmosphere vast amounts of methane, a GHG more than twenty times as bad as CO2. But GHGs aren’t coal’s only environmental cost. According to Scientific American, the average coal plant emits more than 100 times as much radiation per year than does a comparatively sized nuclear power plant, in the form of fly ash.Australia has particular culpability for coal’s historical and continuing damage to our environment, as one of the largest consumers of coal per capita, and also the largest exporter.Action to wind back burning of coal is well overdue. We certainly don’t need the planned huge new coal mines in the Galilee Basin. The Abbott Point port to service them would further damage the Great Barrier Reef.

Matt :

10 Jul 2014 12:55:15pm

Let's face it, no politician is going to entertain the option of "leave the coal in the ground" - if the nation were a company, to do so would leave its leaders open for an investor lawsuit for failing to maximise shareholder value.

Of course, a nation isn't a company, and only a fool, or someone with a high school economics education would seek to equate them.

Subscribe

How Does this Site Work?

This site is where you will find ABC stories, interviews and videos on the subject of Environment. As you browse through the site, the links you follow will take you to stories as they appeared in their original context, whether from ABC News, a TV program or a radio interview. Please enjoy.

Best of abc.net.au

Shaping from the soul

For Murray 'Muzza' Bourton, surfing is a 'drug' and surfboard shaping is a lifestyle.